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Bull of the Day: Dave & Busters Entertainment (PLAY)
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Dave & Buster’s Entertainment (PLAY - Free Report) is a Zacks Rank #1 (Strong Buy) that owns and operates entertainment and dining venues for adults and families. These venues offer a niche atmosphere, where kids can play games, while adults enjoy live sports or other televised events.
The stock has been trading sideways over the last two years, but positive earnings momentum has grabbed the attention of investors. The stock recently made 2023 highs and has pulled back since. With PLAY trading up just over 10% on the year, there seems to be much more potential for the stock to run higher in the back half of the year.
About the Company
Dave & Busters was founded in 1982 and is headquartered in Coppell, Texas. The company employs over 22,000 people and has a market cap of $1.8 billion.
In addition to the strong Zacks Rank, the stock has a Zacks Style Score of “A” in Value and “B” in Growth. The stock has a Forward PE of 12, making it attractive for value investors.
Q1 Earnings
In early June, D&B reported first-quarter earnings, surprising to the upside by 24%. Q1 came in at $1.45 v $1.17 expected, while revenues were in line with expectations.
Same-store sales were down 4.1% annually. But adjusted EBITDA increased 29.8% Y/Y to $182.1 million, with margins contracting to 30.5% from 31.1% a year ago.
CEO Chris Morris had the following comments about the strong quarter:
“Our extremely talented team of operators and support center employees continue to execute on the breadth of strategic opportunities we've identified to unlock significant revenue growth and cost efficiency opportunities in our business which will continue to bring meaningful upside to all stakeholders and in all macro-economic environments. As a testament to the conviction, we have in the long-term success of our business and the value we see in our shares, we have repurchased $200 million of common stock thus far in fiscal 2023, reducing our shares outstanding by nearly 12%.”
In addition to the stock buyback, management displayed confidence in their significant liquidity profile, strong balance sheet, and substantial cash flow. The company says it will “provide the flexibility to invest in the business and opportunistically return capital to shareholders.”
Estimates Rising
While analysts are mixed on the short-term, the company is seeing earnings estimates turn higher long-term.
For the current year, numbers have gone up 12% over the last month, moving from $3.18 to $3.56. For the next year, estimates have gone higher by 14% over that same time frame, moving from $3.83 to $4.35.
Price targets for the stock are going higher as well, with a handful of analysts looking for the PLAY to move into the $60 area, or 50% higher from current levels.
After earnings, BMO moved their target to $60, from $55 and has an Outperform rating. Truist has the stock rated as a Buy and has a $63 target.
Dave & Buster’s has since held an investor day presentation to give investors a better view of the future. After that presentation, Raymond James reiterated PLAY with Strong Buy and has a price target of $60.
The Technicals
Since the COVID crash and rally, the stock has been stuck in a large sideways trading range since early 2021. The high end of this range is the $50 level and the low range is $30.
Buy-and-hold investors are no doubt frustrated by the lack of movement, but the recent earnings pop to 2023 highs brought more attention to the stock. Since then, PLAY has pulled back over 15% and almost filled the investor day gap.
For those interested in the name, current levels offer a great entry point for longer-term investors. For more active traders, the moving averages will likely offer support for a bounce.
The 200-day MA is at $37.25, while the 50-day MA is at $36.10. For more patient investors, they might wait for the “Golden Cross,” which is when that 50-day gets above the 200-day. If that occurs it would be a positive sign for momentum and bring more buyers into the stock.
Looking at resistance, the $45-50 level has been a big hurdle. If the stock can get some more upside above that $50 area, the bulls should target a continued extension to the $62 area.
Bottom Line
Dave & Buster’s is a great place for family fun, but the stock has been stuck going sideways after almost two years. Earnings momentum appears to have brought excitement to the name and investors should be watching the stock closely.
The most recent move lower offers a great risk-reward opportunity for both short-term traders and buy-and-hold investors.
If the bulls can keep the 50-day MA level intact, the stock should eventually grind back to those post-earnings highs. If the company can continue its earnings momentum, a move to that $60 level in the back half of the year is possible.
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Bull of the Day: Dave & Busters Entertainment (PLAY)
Dave & Buster’s Entertainment (PLAY - Free Report) is a Zacks Rank #1 (Strong Buy) that owns and operates entertainment and dining venues for adults and families. These venues offer a niche atmosphere, where kids can play games, while adults enjoy live sports or other televised events.
The stock has been trading sideways over the last two years, but positive earnings momentum has grabbed the attention of investors. The stock recently made 2023 highs and has pulled back since. With PLAY trading up just over 10% on the year, there seems to be much more potential for the stock to run higher in the back half of the year.
About the Company
Dave & Busters was founded in 1982 and is headquartered in Coppell, Texas. The company employs over 22,000 people and has a market cap of $1.8 billion.
In addition to the strong Zacks Rank, the stock has a Zacks Style Score of “A” in Value and “B” in Growth. The stock has a Forward PE of 12, making it attractive for value investors.
Q1 Earnings
In early June, D&B reported first-quarter earnings, surprising to the upside by 24%. Q1 came in at $1.45 v $1.17 expected, while revenues were in line with expectations.
Same-store sales were down 4.1% annually. But adjusted EBITDA increased 29.8% Y/Y to $182.1 million, with margins contracting to 30.5% from 31.1% a year ago.
CEO Chris Morris had the following comments about the strong quarter:
“Our extremely talented team of operators and support center employees continue to execute on the breadth of strategic opportunities we've identified to unlock significant revenue growth and cost efficiency opportunities in our business which will continue to bring meaningful upside to all stakeholders and in all macro-economic environments. As a testament to the conviction, we have in the long-term success of our business and the value we see in our shares, we have repurchased $200 million of common stock thus far in fiscal 2023, reducing our shares outstanding by nearly 12%.”
In addition to the stock buyback, management displayed confidence in their significant liquidity profile, strong balance sheet, and substantial cash flow. The company says it will “provide the flexibility to invest in the business and opportunistically return capital to shareholders.”
Estimates Rising
While analysts are mixed on the short-term, the company is seeing earnings estimates turn higher long-term.
For the current year, numbers have gone up 12% over the last month, moving from $3.18 to $3.56. For the next year, estimates have gone higher by 14% over that same time frame, moving from $3.83 to $4.35.
Price targets for the stock are going higher as well, with a handful of analysts looking for the PLAY to move into the $60 area, or 50% higher from current levels.
After earnings, BMO moved their target to $60, from $55 and has an Outperform rating. Truist has the stock rated as a Buy and has a $63 target.
Dave & Buster’s has since held an investor day presentation to give investors a better view of the future. After that presentation, Raymond James reiterated PLAY with Strong Buy and has a price target of $60.
The Technicals
Since the COVID crash and rally, the stock has been stuck in a large sideways trading range since early 2021. The high end of this range is the $50 level and the low range is $30.
Buy-and-hold investors are no doubt frustrated by the lack of movement, but the recent earnings pop to 2023 highs brought more attention to the stock. Since then, PLAY has pulled back over 15% and almost filled the investor day gap.
For those interested in the name, current levels offer a great entry point for longer-term investors. For more active traders, the moving averages will likely offer support for a bounce.
The 200-day MA is at $37.25, while the 50-day MA is at $36.10. For more patient investors, they might wait for the “Golden Cross,” which is when that 50-day gets above the 200-day. If that occurs it would be a positive sign for momentum and bring more buyers into the stock.
Looking at resistance, the $45-50 level has been a big hurdle. If the stock can get some more upside above that $50 area, the bulls should target a continued extension to the $62 area.
Bottom Line
Dave & Buster’s is a great place for family fun, but the stock has been stuck going sideways after almost two years. Earnings momentum appears to have brought excitement to the name and investors should be watching the stock closely.
The most recent move lower offers a great risk-reward opportunity for both short-term traders and buy-and-hold investors.
If the bulls can keep the 50-day MA level intact, the stock should eventually grind back to those post-earnings highs. If the company can continue its earnings momentum, a move to that $60 level in the back half of the year is possible.